18291: Personal Use of Rental Property in Business Returns – Form 8825

Why is the entity's business or personal use not being calculated for Form 8825?

Unlike in 1040 returns, business and personal use is not automatically calculated for Form 8825 rental property on 1120-S and 1065 returns.

Enter the number of Personal use days on screen 8825 (Rental Real Estate). The program assumes that the nondeductible personal use portion has been accounted for on the entity’s books and records and that the entries on screen 8825 are ne nondeductible expenses attributable to the personal use of the rental property. For this reason, data entered on screen 8825 flows directly to Form 8825 without any adjustments.

Adjusting for Personal Use

If income and expenses attributable to the personal use of the rental are not already present in the entity’s completed trial balance, the preparer must manually figure the total nondeductible expenses attributable to the personal use of the property.

After entering rental Income/Expense on screen 8825 (Rental Real Estate), figure the entity’s personal use percentage:

[# of Personal use days]    /     [# of Personal use days + # of Fair rental days]     =      Personal use percentage

Multiply the personal use percentage by the total of all items entered on the Income/Expense section of screen 8825 to figure the nondeductible expenses attributable to personal use of the property. The total personal use amount must then be entered as a negative amount on the Additional other expenses line of screen 8825.

Afterward, recalculate and view the return. If any adjustments are needed for Schedules L or M-1, use either of the following screens:

• Screen L (Assets, Liabilities, and Equity (Capital))
  
• Screen M1 (Reconciliation of Income)